Capitol Alert

What is California doing about the daily fantasy sports controversy?

Len Don Diego, marketing manager for content at DraftKings, a daily fantasy sports company, works at his station at the company's offices in Boston.
Len Don Diego, marketing manager for content at DraftKings, a daily fantasy sports company, works at his station at the company's offices in Boston. The Associated Press

Another year has come and gone without any resolution in California’s long-simmering battle over legalizing Internet poker, and now politicians’ attention may be shifting to a newer, shinier form of online wagering: daily fantasy sports.

The games – where players form teams of athletes and earn points for their on-field performance, but with more immediate payouts than seasons-long fantasy leagues – have skyrocketed in popularity in the past few years amid a multimillion-dollar marketing blitz by companies like DraftKings and FanDuel. They’ve also attracted the attention of regulatory authorities in states such as Nevada, which argue the sites constitute an illegal gambling operation.

New York Attorney General Eric Schneiderman upped the stakes earlier this month when he ordered daily fantasy sports companies to stop accepting bets there. A court hearing for a preliminary injunction is set for Wednesday, and the judge will have to decide whether these sites offer a game of skill, which rewards participants for strategic choices based on their knowledge of the sport, or a game of chance, which would make it gambling and thus illegal under New York state law.

That debate is brewing in California, too. So far, the pace of action has been slower, but advocates on both sides are already laying the groundwork for what could be an expensive and contentious clash to come.

An ally of gambling interests in the state, Assemblyman Adam Gray, D-Merced, has taken a more sympathetic approach. In September, he amended Assembly Bill 1437 to propose licensing and regulating daily fantasy sports in California. An informational hearing in his Assembly Governmental Organization Committee is set for Dec. 16.

“It is not my intent to stifle or ban this growing industry as other states have done, but I believe California has a responsibility to protect its consumers,” Gray said in a statement. “We can only do so by bringing this industry out of the shadows.”

Meanwhile, a week before Schneiderman’s cease-and-desist, Assemblyman Marc Levine, D-Greenbrae, sent a letter to California Attorney General Kamala Harris asking her to take a similar action.

Contending that daily fantasy sports sites are gambling businesses that must be licensed by the state, Levine wrote, “These games should be shut down in California until California law is made clear and consumers are protected.”

Harris, a candidate for U.S. Senate, hasn’t weighed in publicly yet; her office said she “can't comment on a potential or ongoing investigation in order to protect the integrity of any investigation.”

Neither have the complex array of gambling interests in California – Indian tribes, horse tracks, card rooms – that have fought the Internet poker issue to a standstill.

But you can be assured that things are getting serious: DraftKings and FanDuel both signed up Sacramento lobbying firm Sloat Higgins Jensen and Associates in June.

Alexei Koseff: 916-321-5236, @akoseff

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